Oral Testimony of Steve Hoffman, August 1999 - Center for Professional Responsibility

Oral Testimony of Steve Hoffman,President of the New York County Lawyer's Association,before the ABA Commission on Multidisciplinary Practice

August 8, 1999

The last scheduled speaker of the afternoon was Steve Hoffman, President of the New York County Lawyer’s Association. He complimented the Commission’s work as careful and thoughtful and said that it served to wake up a sleeping profession. The New York County Lawyer’s Association has issued a report that takes a somewhat different position. The Bar’s position is that multidisciplinary practice should be permitted only if lawyers retain full control of the MDP including 66 2/3 ownership and vote, and nonlawyers and the MDP itself would be bound by legal ethics rules. They believe that permitting MDPs that practice law to be controlled by nonlawyers creates an unacceptable risk that the core values of the legal profession will be compromised. They also believe that the need for such firms has not been demonstrated. Further, they do not believe that the regulatory scheme proposed by the Commission for MDPs controlled by nonlawyers is workable. He was grateful that the Bar’s report and recommendations had been posted on the Commission’s website. The New York County Lawyer’s Association was founded in 1908 to provide a bar association where all lawyers could be members regardless of race, gender, religion or national origin - a quite revolutionary notion in those days. Since that time the Bar has been one of the most important organizations speaking for lawyers in solo and small firm practice. He said he knew there has been a great deal of discussion concerning how lawyers from solo and small firm practice feel about the Commission’s recommendations. He came to tell the Commission that it is very hard to find any support for its recommendations in that area of the profession, at least in New York. The New York County Bar’s report, the Commission was told, was adopted by a sharply divided vote; an almost equal portion of the Board of Directors dissented and urged permitting no MDPs at all. Because he believes himself to be a representative of solo and small firm practitioners he has tried to ascertain their viewpoint. There have been several occasions to do this, such as the recent meeting of the New York County Lawyer’s Association about a week ago at which Seth Rosner participated as well as the June meeting of the New York State Bar Association House of Delegates. Since the NYCLA’s statement was the first by a large bar association in response to the Commission’s proposal it received a lot of publicity and elicited response from a number of practitioners. Unfortunately there is almost solid opposition to the Commission’s proposal based on two things: 1) the proposal to permit MDPs controlled by nonlawyers would seriously threaten the independence of lawyers, and 2) small firm lawyers are very concerned about the economic impact of MDPs on them. He doesn’t believe that the ultimate position of the Bar should be determined by the economic interest of lawyers. The New York County Lawyer’s Association did not rely at all on that in its report. At the same time he doesn’t think those interests can be ignored if there is going to be any real attempt at reaching a consensus in the profession.

Considering the Bar’s report raises the very good point of the difficulty of producing empirical evidence in support of need or client desire, Steve Nelson asked Mr. Hoffman how he would propose it be proved? Mr. Hoffman thought that if the Bar report were followed and MDPs controlled by lawyers were allowed the profession might get a sense of the public reaction to them. They didn’t really see what benefit to the public accrues by allowing MDPs controlled by nonlawyers. They certainly understood the interest in such organizations by certain groups of nonlawyers, but it was not clear to them there would be any benefit for the public. How would one turn the clock back if it turned out that allowing MDPs controlled by nonlawyers was a colossal failure? How would the independence of the legal profession be restored? Mr. Nelson then asked if that wasn’t an argument against any change at all unless there is proof of foresight. No, Mr. Hoffman said, it is an argument against rapid and drastic change, an argument in favor of more measured changes such as what the NYCLA Bar proposed. Dean Powell questioned the extent to which Mr. Hoffman or his group considered the present attempts to regulate multidisciplinary involvements by lawyers in practice. Mr. Hoffman was glad to be asked the question as he has been feeling for awhile that in the end there would be two debates. One would be what is the official position of the legal profession and the courts, and the second is what is going to be done about the organizations that ignore them. He thinks the second issue is a much more difficult one. He intends to ask the New York County Lawyer’s Association Special Committee on MDPs to start to study that issue and hopes to convene an open meeting in January in New York on the issue. He thinks it’s what will be the real issue. Dean Powell then asked if the situation was advanced or helped in any way by the Commission’s recommendation that where lawyers are working with nonlawyers there be certification and audit to determine whether in fact safeguards are being applied for the benefit of clients. Mr. Hoffman thought that would have some beneficial effect for organizations that willingly certified, but as to those who found the rules uncomfortable and decided they’d rather proceed on their own, the profession would be in the same position as it is now. That is, is the Bar going to go after these organizations and try to limit their practice on the grounds it is the unauthorized practice of law? From that point of view he doesn’t think the Commission’s Report really advances the ball. He is concerned that in the end the issue is going to be what happens when the Bar comes out with its position, whether it’s the Commission’s position or some other, and the accounting profession (he had read the AICPA response) decides it’s not willing to abide by the requirements, and it is just going to continue doing what it’s doing. At that point the Bar would be where it is now, except in a slightly different context; that is, someone would have to decide to revoke the license to practice law of the attorneys in that organization. That’s a big step that the profession hasn’t been willing to take yet. Dean Powell followed up, wouldn’t the clear standard of a certified entity subject to audit make a major difference? Mr. Hoffman asked wasn’t the Bar in the same position now; couldn’t it take a look at what is really going on in some of these organizations and determine for itself whether those lawyers are practicing law. The question presented is what is the profession going to do about it? Dean Powell said there is no systematic effort to audit operations presently and no jurisdiction has moved in the aggressive way that the Commission has recommended. Mr. Hoffman said one of the reasons they oppose the suggestion that there be audits is the thought that the courts have no stomach for this. He referenced his conversation with judges and the recent New York State experience with the initiation of mandatory CLE where the NYSBA proposed a very elaborate structure in which the courts closely policed the lawyers obligations and the court (exhibiting no interest in the bar plan) instead proposed a system which was essentially self-certification. He was very dissatisfied with a system that allowed any lawyer who wished to do so simply to lie about whether he or she had met the CLE requirements, but he thought the Commission’s recommendation was just putting a very heavy regulatory burden where it didn’t belong. Dean Powell questioned whether jurisdictions that have adopted random audits had any difficulty relying on the audits. Mr. Hoffman said that random audits in New York are so random that he doesn’t know of anybody who has been audited. Dean Powell again questioned whether he knew of any difficulty with the court’s willingness to enforce. Saying that the courts and the disciplinary committees do not have anywhere near the interest and the funding needed to enforce, Mr. Hoffman applauded the Commission’s imaginative solution that the MDPs pay for the process. However, he thinks the issue is going to take a great deal more discussion and in the end the profession is going to find that the courts in the 50 states do not have a real interest in taking a heavy regulatory role in this area. The Chair asked whether the profession doing nothing (with no one calling time-out on the Big Five or American Express or H&R Block or Century Business Systems) was good, and what did Mr. Hoffman suggest. Mr. Hoffman said the next step is really to think about how the Bar feels about the unauthorized practice of law as that’s going to be a problem regardless of what the Commission does. Although they can occupy their particular part and wreak a certain amount of havoc the Big Five accounting firms and American Express can’t change the face of the entire American legal system and the legal profession. As long as the Rules of Professional Conduct require lawyers to practice only with lawyers and to honor the core values of the profession almost all the lawyers in the United States will. The Chair commented that the Bars also seem not to have a stomach for regulatory action because if the lawyers who are now in accounting firms are practicing law it is a slam dunk MR 5.4 violation.